Berkadia Commercial Mortgage, the commercial real estate
servicer which is a hybrid of
's Berkshire Hathaway (BRK.A)(BRK.B) and Guru
s' Leucadia National (
), reported last week that it has acquired Hendricks &
Partners, a multifamily investment banking company that has now
changed its name to Hendricks-Berkadia.
Based in Phoenix, Hendricks & Partners is a company that
advises clients on the sale, purchase and financing of
multifamily real estate through its 30 offices in the U.S.
Through this partnership, both parties will experience its
desired expansion in client-base and services.
Developed in 2009, Buffett and Cummings formed Berkadia, betting
that the U.S. commercial real estate market would rebound from
its dark period when millions of homes were foreclosed and
homebuyers resulted to renting, leading to stricter lending
standards and loan approvals.
In this February 2012 video snippet, Buffett appears on CNBC's
Squawk Box and describes the market as a "really attractive asset
Berkadia is an approved lender for Fannie Mae, Freddie Mac and
HUD/FHA, and has financed various community projects including
multifamily, retail, office, industrial, senior housing, student
housing and manufactured housing.
"Since the company was formed back in 2009, Berkadia has been
able to steadily grow its strength and presence in the commercial
real estate industry," Buffet said in a statement. "We see
Berkadia's acquisition of Hendricks as another significant step
in the growth of their multifamily expertise and services."
Buffett's confidence in real estate recovery runs deep. Wells
), the largest mortgage lender in the U.S., remains Berkshire's
second largest holding, representing 19.4 percent of its
portfolio. Buffett has also been reported last October in
partnering with Canadian real estate investor, Brookfield Asset
Management, through Berkshire affiliate, HomeServices, to
introduce Berkshire Hathaway HomeServices, a franchise brand that
will serve as a full-service residential brokerage firm.
Cummings, himself, remains optimistic about the housing economy
as well. He mentioned Berkadia in his
April 2012 shareholder letter
, expressing that it will be a slow and steady road before
experiencing large returns from that market:
"The real estate financing market remains depressed with the
commercial mortgage backed security market in prolonged intensive
care, the primary reason that Berkadia's book of Mortgage
Servicing Rights continues to shrink. From 2010 to 2011, the
portfolio principal balance shrunk from $214 billion to $190
We are not alarmed by this contraction for three reasons. First,
we expected it and priced the deal accordingly. Second, we
restructured the company to hopefully become the lowest cost
servicing provider in the industry. Finally, Berkadia's national
network of originators are beginning to refuel the servicing
engine, albeit slowly.
When Berkadia originates commercial loans for sale to investors,
we typically retain the servicing rights. In 2011, Berkadia
originated $5.2 billion of multifamily and commercial loans, up
from $4.6 billion in 2010. The majority of these loans were
multifamily loans sold to Fannie Mae, Freddie Mac, Ginnie Mae or
the Federal Housing Administration, with Berkadia retaining the
servicing rights. The more loans Berkadia can originate, the
faster it will stabilize the servicing portfolio and the better
the return on our investment.
Making money from a slowly melting ice cube is hard work and the
success to date is a testament to the work of Hugh Frater
[Berkadia CEO] and his team. When Hugh presented a budget for
2012 with an increase in both MSRs and dividends, we did not
argue. Go team!"
Leucadia National, which Cummings runs with Joseph Steinberg,
currently maintains three stocks: Cowen Group Inc. (
), INTL FC Stone Inc. (
) and Jefferies Group Inc. (
). Typically, the investment company engages in buying distressed
companies at discount prices, and then revives them, profiting
from the sell.
Besides Wells Fargo, Buffett's top holdings include Coca Cola (
), IBM (
) and American Express (
To view more details about the two Gurus' portfolios, visit
Ian Cummings' stock picks
and Warren Buffett's stock picks.
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